Our specialist Trustee Investment Review Service is unique and for many professionals and lay Trustees we are the expert of choice in this area.

The Trustee Act 2000

The Trustee Act 2000 replaced the Trustee Investment Act 1961 and parts of other legislation affecting Trustees including the 1925 Trustee Act. It was a significant change in Trust legislation and in essence, brought together all of the previous Acts into one coherent and modern legislative framework.

From an advice perspective, the Act concentrated on three main areas:

• A statutory duty of care for all Trustees

• A wider general power of investment

• Rules regarding the appointment of nominees, custodians and investment managers

The Act brought together these areas in order that Trustees understand their responsibilities, particularly in relation to "taking appropriate advice" on investment matters. The result is that trustees have to become more proactive and their attention is more closely drawn to their duty to actively consider and review investment of the Trust assets.

Duty of Care

The statutory duty of care replaces common law. It aims to bring certainty and consistency to the standard of confidence and behaviour that is expected of Trustees. This standard considers the experience and special knowledge of Trustees, and if they are acting in a professional capacity.

Trustees may be liable if they have failed to comply with the duty of care when they draw up an investment policy statement, enter into and review the arrangements or assess compliance. They must regularly review the arrangements and their implementation. With investment management functions, they must consider whether to revise or replace the policy statement and ensure compliance with the statement.

Investment portfolios should be regularly assessed against a suitable benchmark which reflects the investment objectives and risk levels of the Trust. For most Trusts, a two-way client agreement and regular meetings are sufficient to meet these requirements.

The key points to consider and discuss with your financial adviser/ investment manager are:

• Whether investment objectives and policies are still appropriate;

• Should wider and narrower range portfolios be merged;

• Should the investment mandate be switched from advisory to discretionary;

• Consider moving stocks into nominees;

• Review arrangements with agents; and

• The documentation of decisions.

General Power of Investment

The constraints of the Trustee Investments Act 1961 have been withdrawn. Trustees are able to make any investment that is expected to produce an income or capital return (or a combination of both). The "narrower" and "wider" ranges of investment classes have been removed and this opens up the possibility of investing in other asset classes.

The suitability requirement - to ensure the investment should be in a suitable asset class and that within each asset class there is good stock selection, and that the overall investment portfolio should be diversified - is retained.

The Act allows Trustees to grant full discretion for investment decisions to financial advisers/ fund managers. Any investment power is subject to any restriction or exclusion imposed by the Trust instrument itself.

In practical terms, this means that the Trustees must:

Set and regularly review the objectives of the Trust and define the requirements carefully.

In conjunction with the financial adviser/investment manager, set and regularly review investment policy.

Agree the terms with the adviser/investment manager and secure their written agreement. The investment policy must be written to ensure that the functions are carried out in the best interests of the Trust.

When setting the objectives, Trustees should consider the availability of other resources, the need to pay fixed amounts at fixed times in the future, the nature of any liabilities, the minimum income requirement and how the Trust's requirements might be affected by major tax or economic changes.

For larger Trusts and charities, budgets should be prepared estimating future income and expenditure.

Appointment of nominees, custodians and investment managers.

All Trustees have the general power to appoint a nominee to hold the title of the Trust's investments and/or a custodian to look after any title documents. Agreements must be in writing.

A correct nominee would have the following security features:

• It is separately incorporated from the investment manager.

• It is a non-trading company.

• It provides an insurance policy / indemnity over and above the statutory compensation limits.

Charitable Trusts must act in accordance with any guidance provided by the Charity Commissioners on selecting and appointing a nominee or custodian. The appointed investment manager should be properly qualified.

The Act requires Trustees to obtain and consider proper advice from a person who is properly qualified, unless it can be reasonably concluded that in the circumstances it is unnecessary or inappropriate to do so.

We offer the full range of investment services for Trustees. Through our highly regarded Wealth Management service and arrangements with some of the leading Investment Managers in the UK, we are able to offer both advisory and discretionary investment services. Our service ensures that Trustees have the full range of support Trustees in order that they meet the requirements of the Trustee Act 2000.

As part of our service in this area we also offer links to reputable legal firms who deal with legal issues surrounding the role of Trustees and are often able to act as a Professional Trustee. Click here to go to our map page, to see the firms who may be able to assist you in this highly specialized area.

Please note that none of the legal firms of individuals listed have any vested interest in Nestor Partnership nor we do in them. These links are purely a service that we provide for our clients to assist them in identifying and locating suitable professionals.

We offer an unrivalled level of expertise, service and ongoing support for Trustees (both professional and lay) and clients.

Please contact us if you require any further advice or information.